The target only moves when a compensation event is implemented, so a target cost not updated for compensation events usually means they are stuck, not forgotten. It depends on which stage each one has reached, because each stage has its own time limit and its own way of being unblocked.
Payment under Option C continues on cost in the meantime, so nothing seems urgent until the share is worked out. This page follows the NEC4 Engineering and Construction Contract (ECC). It is listed with the other NEC questions answered.
Find out where each event has stuck
| Where it is | Time limit (NEC4 ECC) | How to unblock it |
|---|---|---|
| Happened, not notified | Contractor: eight weeks from awareness (61.3) | Notify. A Project Manager's instruction should be notified by the Project Manager under 61.1 |
| Notified, no decision | One week (61.4) | Contractor gives notice of the failure. Two more weeks' silence and it counts as a compensation event |
| Quotation not submitted | Three weeks from the instruction (62.3) | Contractor quotes. If it doesn't, the Project Manager assesses (64.1) |
| Quotation with the Project Manager | Two weeks (62.3) | Notice of the failure. Two more weeks and it is treated as accepted (62.6) |
| Project Manager assessing | The time allowed for a quotation (64.3) | Notice of the failure (64.4) |
| Accepted, but not in the Activity Schedule | No stated period | An admin issue. Under 63.14 (63.12 in NEC3) the event's assessment changes the Activity Schedule. Update the total |
The dates can be extended only by agreement before they run out (62.5 for quotations). Informal "leave it for now" conversations don't do that. Compensation events under Option C has more about pricing them.
A reconciliation you can do in an afternoon
- Start with the tender total of the Prices.
- List every event by status: implemented, quoted, instructed but not quoted, notified, or suspected.
- Add only the implemented ones. That is today's target.
- Add the likely value of the rest, with a realistic view of each. That is your expected final target.
- Agree the first number with the other side, then the list of events, and leave the values of the rest until later.
Then run the share both ways, against the same forecast. The result shows how much money depends on the backlog.
| Illustrative figures | Target as implemented | Target with open events |
|---|---|---|
| Total of the Prices | £12,000,000 | £12,900,000 |
| Forecast Price for Work Done to Date | £13,200,000 | £13,200,000 |
| Excess | £1,200,000 | £300,000 |
| Contractor's share at a flat 50% | £600,000 | £150,000 |
Why it hurts each side
| Contractor | Client and Project Manager |
|---|---|
| Provides for a bigger loss than is real, or worse, doesn't know the true number | Can't forecast its final outlay, because its share of the excess is unknown |
| Forecasting after the work is done gets harder. Pricing an event after the work covers this | Reports a false saving or overrun to its board |
| Faces a large adjustment when the preliminary share is worked out at Completion of the whole (54.3) | The preliminary share uses forecasts of the final total, so the open events get estimated anyway |
Both sides have a reason to act, but those reasons differ. A Contractor below target may be less motivated to chase events, because the saving only partly reaches it. A Project Manager who fears a target rise may slow its replies. The contract's deadlines exist for both of these.
Sample reminder, in our own words
"The following compensation events remain open: [numbers and status]. Under clause 62.6 we notify you that you have not replied to our quotation for event [number], submitted on [date]. If no reply is received within two weeks of this notice, the quotation will be treated as accepted. Please let us have your plan for clearing the rest by [date]."
Likely responses
- "Don't serve notices, we'll sort it at the end." That is a real offer, and often kindly meant, but it leaves your rights unprotected. A short agreement extending the dates, signed before they run out, is the proper version.
- "Your quotation has too much in it." The answer to that is a revised quotation instruction with reasons or a Project Manager's assessment within the period. Neither is silence.
- "Target can wait: you're getting paid." True for cash, not for the final share.
If Completion has come and events are still open, see a project that ended with open events. If the two of you simply disagree on the values, the dispute route is there, and under Option W1 its time limits are short.
Related guides
- NEC Questions Answered: Real Situations on Site
- The Client Wants to Audit Our Books: Do We Have to Agree?
- Are Our Head Office Overheads Recoverable?
- Can We Add Margin on Subcontractor Costs?
- We Do Not Have Records for Our Defined Cost
- We Are Heading Over Target on Option C: What Now?
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This guide is general information in our own words, not legal advice. Your contract and its Contract Data always govern. NEC, NEC3 and NEC4 are trade marks of Thomas Telford Ltd; Contract Status is not affiliated with or endorsed by NEC.